• Less than 20 percent of your
income, you are doing well
• Between 20 percent to 35
percent, consider reducing
your overall debt
• More than 35 percent, consider
credit counseling or some type of
aggressive debt-reduction strategy
3. Don’t over-apply for credit.
Limit the number of loan applications
you submit. Each bid shows up as an
inquiry in your credit report. Even if
you’re just comparison-shopping for the
best rate, too many inquiries can be
viewed as a desperate bid to obtain
credit to get out of financial trouble.
4. Shred your documents. Be sure
to destroy any piece of paper with Social
Security or credit-card numbers. Thieves
often go through garbage and retrieve
people’s identification so they can use
this information to commit fraud.
5. Don’t give information away. Be
extremely cautious how you use your
Social Security number: It is a key personal identification number that is a
gateway to your personal identity. If
required to provide this information,
always ask if there is another option.
6. Check your credit reports on a
regular basis. The only way to protect
your name and credit is to be proactive.
With the rise of identity-theft cases, it is
important to review your credit files and
to report any inaccuracies to the major
• The name of the creditor
• Account number (which may be scrambled for protection)
• The date the account was opened
• The type of credit (mortgage, car loan, etc.)
• Whether it’s a joint account or in your name only
• Total amount of loan
• How much you owe
• Amount of monthly or fixed payments
• Status of account (open, inactive, closed, paid, “charged off,” etc.)
Note: The term “charged off” means that the creditor has written off your
account and taken it as a loss. Some reports use numeric payment codes;
generally, the lower the number, the better the mark.
This section lists financial blemishes such as bankruptcies, judgments and
tax liens. The goal is to have this section of your report blank.
The final section of the report lists everyone who has asked to see your
report. For example, it is increasingly common for insurance companies to
review your credit before extending auto or health insurance. Many employers
now check credit before they consider you for a position. If you rent, you
may have already been through a credit check to determine your worthiness
as a renter.
Because your credit history is a critical part of your financial standing, it’s
important to review your credit reports periodically and follow up with the
credit-reporting agencies and your creditors to correct any errors.—Will Fifield